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The influence of oil, gold and stock market index on US equity sectors

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  • Ahmed BenSaïda
  • Jose Arreola Hernandez
  • Houda Litimi
  • Seong-Min Yoon

Abstract

Within a Markov regime switching perspective, we examine the spillovers between the returns of the ten most representative US equity sectors and the returns of gold, oil, and S&P 500 (GOI), on the one hand, and their implied volatilities, GVZ, OVX, and VIX, on the other hand. Our objective is to check if the implied volatilities of GOI influence the US equity sectors more than GOI returns. Single regime results show that GOI volatilities affect the equity sector returns more than GOI returns, suggesting that forward-looking volatility expectations play a more significant role in determining sector returns than current and historical GOI returns. During tranquillity periods, all three implied volatilities influence equity sector returns more than GOI returns. Moreover, VIX has the strongest effect on sectoral returns. During turmoil periods, VIX influences the sectoral returns more than S&P 500 returns. However, the returns of gold and oil influence equity sector returns more than their implied volatilities. The result may be useful to portfolio and equity risk managers for improved forecasting and hedging in the US equity markets.

Suggested Citation

  • Ahmed BenSaïda & Jose Arreola Hernandez & Houda Litimi & Seong-Min Yoon, 2022. "The influence of oil, gold and stock market index on US equity sectors," Applied Economics, Taylor & Francis Journals, vol. 54(6), pages 719-732, February.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:6:p:719-732
    DOI: 10.1080/00036846.2021.1969001
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    Cited by:

    1. Zhuhua Jiang & Rim El Khoury & Muneer M. Alshater & Seong‐Min Yoon, 2024. "Impact of global macroeconomic factors on spillovers among Australian sector markets: Fresh findings from a wavelet‐based analysis," Australian Economic Papers, Wiley Blackwell, vol. 63(1), pages 78-105, March.
    2. Al-Nassar, Nassar S. & Assaf, Rima & Chaibi, Anis & Makram, Beljid, 2024. "The nexus between mineral, renewable commodities, and regional stock sectors during health and military crises," Resources Policy, Elsevier, vol. 96(C).
    3. Tian, Maoxi & Alshater, Muneer M. & Yoon, Seong-Min, 2022. "Dynamic risk spillovers from oil to stock markets: Fresh evidence from GARCH copula quantile regression-based CoVaR model," Energy Economics, Elsevier, vol. 115(C).
    4. Harshit Mishra & Parama Barai, 2024. "Entropy Augmented Asset Pricing Model: Study on Indian Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(1), pages 81-99, March.

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